GST refund dispute for pre-July 2017 contracts must be resolved through arbitration under Section 142(10)

The Allahabad HC dismissed a petition challenging a Government Order dated 08.11.2017 regarding GST refunds on pre-July 2017 contracts. The petitioner contested the validity of a formula introduced for VAT rate calculations under Section 142(10) of the GST Act. The court held that disputes regarding refund amounts should be resolved through arbitration as per the contract's Clause 34. The petitioner failed to demonstrate how the Government Order's formula violated Section 142(10), which doesn't prescribe calculation methods. The court found no evidence that the formula was arbitrary or unreasonable, resulting in petition dismissal.

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Issues:
1. Challenge to impugned orders dated 02.04.2019 and 08.11.2017
2. Liability of recipient for Goods and Services Tax (GST)
3. Payment dispute and refund claim of GST
4. Validity of Government Order dated 08.11.2017
5. Arbitration clause applicability for disputed amounts

Analysis:

1. The petitioner filed a writ petition challenging the impugned orders dated 02.04.2019 and 08.11.2017. The prayers included seeking quashing of the orders, setting aside specific paragraphs, and mandamus for various directions related to GST payment and adherence to government policies.

2. The petitioner, a private company engaged in civil construction work, claimed that the respondents, as recipients of their services, were liable to pay GST under the GST Act of 2017 on a reverse charge basis. The petitioner executed work both before and after the enactment of the Act, raising bills for payment.

3. The petitioner demanded payment of GST from the respondents, which was deposited with the Commercial Tax Department. The respondents disputed the amount, claiming a lower refund value based on a government order. The rejection of the refund claim led to the petitioner seeking relief through the writ petition.

4. The challenge also extended to the validity of sub-Para 2 of Para 2 of the Government Order dated 08.11.2017, alleging that the calculation formula was in contravention of the Act of 2017. The petitioner argued that the formula introduced was arbitrary and unreasonable.

5. The court held that the writ petition lacked merit, emphasizing that the petitioner could address any disputes through arbitration as per the agreement clause. The court noted that the petitioner failed to demonstrate how the formula in the government order violated the relevant provisions of the Act of 2017. The petition was dismissed, with the option for arbitration available for disputed amounts, excluding the admitted sum by the State.

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